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Naira: Nigeria’s external reserves shed $4.28bn in 2023

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Nigeria’s External Reserves Experience $4.28 Billion Decline in 2023

The external reserves of Nigeria have witnessed an 11.55% decrease ($4.28 billion) year-to-date while the naira has shown consistent fluctuations against the dollar in 2023.

According to data from the Central Bank of Nigeria (CBN), the external reserves, which represent the stock of foreign assets held by the apex bank, fell to $33.78 billion as of December 20, 2023, from the $37.06 billion recorded on January 3, 2023.

The continuous decline in foreign currency reserves can be attributed to low revenue from crude oil sales and a surge in demand for foreign exchange (FX), among other contributing factors.

Nigeria, being Africa’s largest economy, heavily depends on oil exports, but its oil revenue has declined due to various factors. Geopolitical events and market conditions have led to fluctuating oil prices, thereby affecting Nigeria’s revenue.

Consequently, the naira has steadily depreciated against other currencies due to a high demand for the dollar amidst a shortage in its supply.

During the year in review, the naira/dollar exchange rate at the Nigeria Autonomous Foreign Exchange Market (NAFEM), the official FX window, depreciated by 125.55% (N578.70).

CBN’s data revealed that the dollar was quoted at N885.88 as of December 23, 2023, compared to the initial rate of N460.93 in the first quarter of the year. At the parallel market, also known as the black market, the naira weakened by 62.16% as the dollar was sold for N1,223 on December 25, 2023, in contrast to N740 at the beginning of the year.

Addressing the country’s foreign reserves, Olayemi Cardoso, governor of the CBN, shared during the Chartered Institute of Bankers of Nigeria (CIBN)’s bankers dinner last month, “We envision that, with discipline and focused commitment, foreign exchange reserves can be rebuilt to comparable levels with similar economies.”

Based on the CBN’s most recent data on external reserves, Nigeria’s gross official reserves decreased by $392 million month-on-month (m/m) to $33.0 billion in November 2023.

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